Airbus Safran Agrees to $440 Million Ariane 6 Contribution

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ISSY LES MOULINEAUX, France — Airbus Safran Launchers, which is building Europe’s next-generation Ariane 6 rocket, on May 29 said it had agreed to contribute 400 million euros ($440 million) to the development contract it expects to sign with the European Space Agency in July.

Company President Alain Charmeau said that, in addition, Airbus Safran Launchers had agreed with ESA that another 200 million euros of the Ariane 6 development contract would be removed as unnecessary expenditures.

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Airbus Safran President President Alain Charmeau

The two decisions remove what Charmeau agreed were potential obstacles to a July signature of the contract, which is now expected to be valued at around 3 billion euros, including the 400-million-euro chunk the company will finance on its own.

ESA and Airbus Safran Launchers had agreed in late 2014, and again earlier this year, that developing the Ariane 6 vehicle on a build-to-cost basis would carry a price tag of 3.215 billion euros.

ESA had said it was debating whether about 200 million euros of that figure was necessary spending, or could be deferred or canceled. In addition, the agency said it wanted industry, which is taking more responsibility and control over the Ariane 6 than for any previous Ariane version, to pitch in up to 400 million euros of the total cost.

Briefing reporters here at Airbus Safran Launchers’ headquarters just outside Paris, Charmeau said the company elected not to spend time negotiating with ESA over who pays what and risking a delay in the July contract signing date.

He said it was the company, and not ESA, that found 100 million euros of savings by shaving the cost of certain buildings and facilities. Added to the 100 million that ESA had proposed leaving out of the contract dropped the price by a total of 200 million euros.

“So as of today we are talking about a contract with ESA that is valued at around 2.6 billion euros” after removing the unneeded work and subtracting the company’s own contribution, Charmeau said.

A separate contract between ESA and the French space agency, CNES, is being negotiated for the Ariane 6 ground installations at Europe’s Guiana Space Center in South America. CNES has control of that contract, whose value has been estimated at about 600 million euros.

Airbus Safran Launchers gave ESA its Ariane 6 bid May 7, as scheduled. The company has already come to terms with its principal subcontractors — MT Aerospace of Germany, Ruag of Sweden and Avio of Italy — on prices for their Ariane 6 elements, Charmeau said.

In particular, he said, Airbus Safran Launches and Avio had come to terms on responsibility for developing the P-120 solid-fueled rocket stage, which for Ariane 6 will be a strap-on booster and for the Avio-built Vega small-satellite launcher will be the first stage.

Private-equity investor Cinven has been trying to sell Avio’s space division for several years. Finmeccanica is seen as the most likely buyer, but no deal has been concluded. Charmeau said that Avio’s status as a company about to be sold had no particular effect on the negotiations.

Aside from building Ariane 6 structural components, MT Aerospace of Augsburg, Germany, a subsidiary of OHB SE of Bremen, Germany, is researching a new technology for filament-wound rocket stages like the P-120. Charmeau said MT and Avio have agreed that, if the MT-developed technology delivers on the promise of a 30-percent cost savings, then MT will open a second P-120 production line in Germany around 2025.

Charmeau said that, in his company’s view, all the possible sticking points to the Ariane 6 development contract have been resolved and there is no reason a contract could not be concluded in July.

Charmeau also made these points about the future of Arianespace and the risks Airbus Safran Launchers is willing to assume with Ariane 6:

— The French government is likely to approve the sale of CNES’s 34-percent stake in the Evry, France-based Arianespace launch service provider to Airbus Safran Launchers at about the same time as the Ariane 6 developmen contract is signed.

Not surprisingly for someone negotiating the purchase of an asset, Charmeau said the 300-person Arianespace is running structural deficits every year, which are eliminated with 100-million-euro annual cash injections from ESA. This annual payment will cease with Ariane 6 by mutual agreement between ESA and the prime contractor.

He said Arianespace is a powerful brand and that the company would be maintained, at its Evry locale, after the share transaction with CNES, which will give Airbus Safran Launchers some 74 percent of Arianespace’s equity.

— While Airbus Safran Launchers is committing to an Ariane 6 development contract in July, it will not be until 2016 or 2017 that ESA and other European governments make their commitment to providing five satellite payloads year year for Ariane 6 launches.

The Ariane 6 business model is that launching five European government payloads per year, at predetermined prices, will give Airbus Safran Launchers the anchor customer it needs to capture seven more launches per year from the commercial market.

— Substantially more than 50 percent of Airbus Safran Launchers’ revenue is from its work with the French military, mainly on the French deterrent nuclear missile force. This percentage is unlikely to drop in the next three or four years, but should change after 2020 if Ariane 6 is as successful as expected, he said.

— Arianespace and Airbus Safran Launchers have agreed to look for ways to reduce, by 5 percent, the per-rocket cost of the Ariane 5 vehicle when a fresh Ariane 5 order occurs for vehicles to be used starting in 2019.

With a three-year dual-launch period in which Ariane 5 is operated alongside Ariane 6 starting in 2020, this last Ariane 5 bulk order will be smaller than the two previous orders — for 18 and 35 rockets — making it more difficult to realize savings, he said.